How Do They Avoid Being Just the Dumb Pipe

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

How Do They Avoid Being Just the Dumb Pipe

On LinkedIn there was a question in the Telecom Executives Business Network group: "How can a Telco Service Provider value chain defend itself from the attack by the emerging "Cloud" services? My understanding is that the emerging "cloud" services remove value-add and differentiation from the Telco service providers which are cornered to act just as the bit-stream providers (especially for the retail market)."

My answer to that was as follows:

Most telco carriers worry about becoming a Dumb Pipe. Isenberg told them this would happen. They fired him instead of listening. All the value is in Layer 1 or Layer 7.

Layer 1 in owning the network and delivering fast Internet bandwidth. The value there is if you can also deliver it with Quality. The value for the Telco is to deliver it via as many ways as possible to maximize ARPU - wireline, wireless, Wi-Fi, WiMax, cellular.

The value at Layer 7 is the apps - Web 2.0, social networks, SAAS, ASP, virtualization, The Cloud. People have to get to their data. However, Telcos are horrible at implementing and selling managed services. Why?

When you are a cost-cutting organization you will not hire the right people, train your sales staff, provide the necessary customer care, and design a suitable user interface.

The RBOC's can barely keep their copper up and running. If you have a lousy experience with them in wireline or cellular, why would you move to them as your App Provider?

Remember that RBOC's couldn't even sell Centrex, which essentially the first hosted phone system type of service. Their E-Commerce initiatives have been failures. RBOC's partnered with Yahoo on their ISP DSL service.

This also falls under my rant that Telcos don't innovate. There was a time when AT&T Labs was the promised land for PhD's. It is a shadow of what it was in the 80's. Some of that is due to the fact it was spun-off with Lucent. Some of it is that the US doesn't graduate nearly enough PhD students. Some of it is that the R&D budget is shrinking fast. (We even cut the NASA budget). We need pure research. It leads to innovation. If the US is going to be the knowledge center in the future we need to continue to be the leader in research, innovation and patents. I see that shrinking. And it scares me.

When I think about the CEO's of Ma and Pa Bell, my take-away is that the customer is a number, an ARPU figure to be manipulated. Erik says it's the regulatory environment, but I think it is the Bell-head mindset. When you can't get billing right - either because the BSS is too clunky or it is a revenue source - why would someone trust you with their DATA? Fortune 5000 companies probably will because they play it safe and buy by the Brand, but the rest of the 8 million companies in the SMB space don't buy that way. They buy from who they like and trust.

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